Wonkbook: Why the Republican budgets make the poor pay

Posted by Ezra Kleinat 07:59 AM ET, 03/21/2012TheWashingtonPost

I don't think Paul Ryan intended to write a budget that concentrated its cuts on the poorest Americans. Similarly, I don't think Mitt Romney intended to write a budget that concentrated its cuts on the poorest Americans. But there's a reason their budgets turned out so similar: The Republican Party has settled on four overlapping fiscal commitments that leave them with few other choices.

(L-R) Followed by reporter Brian Faler, House Budget Committee Chairman Paul Ryan (R-WI) comes off the House floor after votes and after unveiling his 2013 budget plan at a press conference on Capitol Hill March 20.
(Melina Mara - THE WASHINGTON POST)
The Republican plans we've seen share a few basic premises. First, taxes are too high, and must be cut. Second, defense spending is too low, and should be raised. Third, major changes to entitlement programs should be passed now, but they shouldn't affect the current generation of retirees. That would all be fine, except for the fourth premise, which is that short-term deficits are a serious threat to the country and they need to be swiftly cut.

The first three budget premises means that taxes and defense will contribute more to the deficit, and Medicare and Social Security aren't available for quick savings. That leaves programs for the poor as the only major programs available to bear cuts. But now cuts to those programs have to pay for the deficit reduction, the increased defense spending, and the tax cuts. That means the cuts to those programs have to be really, really, really deep. The authors have no other choice.

In Ryan's plan, for instance, revenues are approximately $2 trillion below the levels in Obama's budget, spending on defense is about $200 billion higher, Social Security is unchanged, and Medicare is about $200 billion lower. So that's approximately $2 trillion in lost revenues that need to be made up -- and then Ryan reaches for more than $3 trillion in deficit reduction atop that.

So the cuts to programs that mainly help the poor are correspondingly deep. The $1.5 trillion the Affordable Care Act was going to spend on subsidizing health insurance for low-income Americans is gone. But then Medicaid and other non-Medicare health programs take an $800 billion cut on top of that. Education and worker training loses $200 billion. Income security loses $800 billion. These are huge cuts.

And that's just in the first 10 years. As time goes on, the scheduled cuts become much deeper in programs for the poor than in programs for the rich. Medicaid, for instance, is only allowed to grow at the rate of inflation, while Medicare can grow at GDP+0.5 percent, which is substantially higher. Food stamps also see their growth capped at a low rate, while Social Security is left untouched. And while Ryan does take aim at tax breaks that he says benefits the wealthy, he intends to close them and use the proceeds to fund a tax cut.

As I said at the top; I don't take this as evidence that Paul Ryan wants to balance the budget on the backs of the poor. I take it as evidence that, given the set of commitments Republicans have made to their base, he didn't really have a choice. It was the only way to make his numbers work.

But that doesn't make the end result any different: Ryan's budget asks for enormous sacrifice from, say, disabled Medicaid beneficiaries even as it appears to provide enormous tax benefits to wealthier Americans. The same is true for Romney's budget, and, in even more exaggerated ways, for the fiscal promises made by Newt Gingrich and Rick Santorum. The Republican Party has backed itself into a fiscal strategy in which this kind of concentrated sacrifice on the part of the poor is the only possible path forward.

Top stories

1) GOP Budgetpalooza! "Paul Ryan’s budget would spend $5.3 trillion less over the next decade than President Obama’s budget. Part of this is health care: Ryan would trim Medicare and Medicaid for a portion of his savings. But he’d also spend $2.2 trillion less on everything else. So what, specifically, is Ryan planning to cut?...Over the next decade, Ryan plans to spend about 16 percent less than the White House on 'income security' programs for the poor -- that’s everything from food stamps to housing assistance to the earned-income tax credit. (Ryan’s budget would authorize $4.8 trillion between 2013 and 2022; the White House’s would spend $5.7 trillion.) Compared with Obama, Ryan would spend 25 percent less on transportation and 13 percent less on veterans. He’d spend 6 percent less on 'General science, space, and basic technology.' And, compared with the White House’s proposal, he’d shell out 33 percent less for 'Education, training, employment, and social services.'" Brad Plumer in The Washington Post.

It relies on some unrealistic assumptions. "There’s an important disclaimer in the very first paragraph of the Congressional Budget Office’s analysis of Paul Ryan’s budget plan...Translated out of CBO-ese, what that means is that CBO hasn’t looked at whether Ryan’s budget will achieve the results Ryan says it will. Rather, it looked at what will happen assuming Ryan’s budget achieves the results that Ryan says it will...He’s saying that in 2050, spending on defense, on food stamps, on infrastructure, on education, on research and development, on the federal workforce, and everything other non-entitlement program combined will be less than four percentage points of GDP. Consider that defense spending has never fallen below three percentage points of GDP, and Mitt Romney has promised to keep it above four percentage points of GDP. Ryan has not outlined a realistic goal." Ezra Klein in The Washington Post.

@igorvolsky: Asked about what "tough" cuts he would make to balance budget, Ryan says "I can go on and on" -- offers no specifics.

@ezraklein: Today was fun. Politicians should release more budgets! And yes, that means you, Dems.

The WashPost's Editorial Board is not impressed: "There is no credible path to deficit reduction without a combination of spending cuts and revenue increases. This is the fundamental conclusion of every responsible group that has examined the issue, most prominently the Simpson-Bowles commission, and it is the fundamental failure of the budget blueprint released Tuesday by House Budget Committee Chairman Paul Ryan (R-Wis.). Instead, and unfortunately, Mr. Ryan’s plan lunges in the opposite direction. He dangles the carrots of lower income and corporate tax rates. He says he would maintain tax revenue and in fact have it grow to 19 percent of the gross domestic product by 2025. Yet he fails to do the hard, and politically treacherous, work of specifying what deductions and credits he would eliminate in order to make all that happen."

2) Mitt Romney: Winner! "Mitt Romney is the winner of Tuesday’s Republican presidential primary in Illinois, a victory that widened his lead over his chief rival for the nomination and will likely provide a jolt of energy to his campaign. In a contest that had whittled down to a head-to-head matchup between the two front-runners, the former Massachusetts governor was leading Rick Santorum by more than12 points. With 69 percent of precincts reporting, Romney had collected 47.1 percent of the vote to Santorum’s 34.8 percent. The results will likely renew questions about Santorum’s viability and prompt Romney to more forcefully embrace the rhetoric of a general election candidate...Despite the solid victory for Romney, who has eeked out more modest wins elsewhere in the Midwest, the contest is unlikely to dramatically shake up the basic geometry of the race." Sandhya Somashekhar in The Washington Post.

@fivethirtyeight: Romney unable to break through with key constituencies tonight, like voters who do not like Mitt Romney.

@anamariecox: bhnjmklhnnvc bnmjhgfdxmnbgnvlk,ghdxnbv. And Romney will have a tough slog but eventual gain the nomination. -30-

3) GOP candidates are relying more on super PACs. "The Republican presidential candidates are running low on campaign cash as expensive primaries in states like Maryland, New York and Pennsylvania loom, leaving them increasingly reliant on a small group of supporters funneling millions of dollars in unlimited contributions into 'super PACs.'...Restore Our Future, the super PAC supporting Mr. Romney, spent more than $12 million in February, most of it on advertisements attacking his rivals as he battled in seven primaries and caucuses that month, according to campaign filings released on Tuesday. That followed close to $14 million in spending on Mr. Romney’s behalf in January." Nicholas Confessore in The New York Times.

4) The housing market continued its slow gains. "U.S. home building fell in February, but permits for new construction reached their highest levels in nearly 3½ years, reflecting housing's uneven and protracted recovery. Home construction decreased 1.1% from January to a seasonally adjusted annual rate of 698,000, the Commerce Department said Tuesday. Construction of single-family homes, which makes up more than 70% of housing starts, fell by 9.9%--the largest drop in a year. Meanwhile, multifamily homes with at least two units, a volatile part of the market, posted a 21.1% gain. Still, January's figures were raised to 706,000 starts overall, a 3.7% improvement from December and the highest level since October 2008. In a positive sign for future construction, the February data showed new building permits rose by 5.1% from a month earlier to an annual rate of 717,000--also the highest level since October 2008. The housing sector has been healing slowly after prices collapsed more than five years ago." Eric Morath and Tom Barkley in The Wall Street Journal.

5) The U.S. will impose a small tariff on Chinese solar panels. "The Commerce Department announced Tuesday it will impose small import duties on Chinese-made solar cells, disappointing a handful of U.S. solar panel makers who complained of being undercut by subsidized Chinese firms and who wanted stiffer penalties. The Commerce Department set preliminary countervailing duties for subsidized Chinese firms at 4.73 percent for Trina, 2.9 percent for Suntech and 3.61 for all others. The decision was hailed by U.S. companies that install solar panels and U.S. companies that export solar manufacturing equipment. Investors also welcomed the news; Suntech’s shares soared 14 percent and Trina’s jumped 7.85 percent. But the manufacturers who brought the case said they still hope that higher tariffs might be added in mid-May for separate dumping allegations." Steven Mufson in The Washington Post.

Top op-eds

1) COHN: Paul Ryan's budget plan is morally bankrupt. "Imagine a politician held a press conference in order to boast about a plan that would take health insurance away from tens of millions of people, while effectively eliminating the federal government except for entitlements and defense spending. You probably can’t, because no politician would ever do that. Except Paul Ryan just did. No, he didn’t put it in quite those terms. Instead, Ryan on Tuesday unveiled the latest version of his proposal for the federal budget, which he calls the 'Path to Prosperity.' He vowed that it would reduce deficits, promote economic growth, and strengthen the safety net. The first two claims are dubious, at best. The third is just dishonest--and, if taken literally, morally bankrupt...The reality of our fiscal situation hasn't changed: Restoring fiscal balance will require a mix of spending cuts and new revenue. This proposal, like Ryan's last proposal, tries to achieve balance entirely with the former. It's not going to work, nor should it." Jonathan Cohn in The New Republic.

2) HOLTZ-EAKIN: Ryan's budget is right for our values: "The House budget is a strong statement of social, economic, and political values. It is courageous at a time when presidential leadership is weak. It is honest at a time when Americans are misled into believing that they can keep “Medicare as we know it,” expand the welfare state, control the debt, remain safe, and . . . tax only the 1 percent. It should be the legislative agenda for 2012. I hope it is the agenda for 2013." Doug Holtz-Eakin in the National Review.

3) MILBANK: The thinking behind Ryan's budget is downright Dickensian. "Ryan’s justification was straight out of Dickens. He wants to improve the moral fiber of the poor. There is, he told the audience at the conservative American Enterprise Institute later Tuesday, an 'insidious moral tipping point, and I think the president is accelerating this.' Too many Americans, he said, are receiving more from the government than they pay in taxes. After recalling his family’s immigration from Ireland generations ago, and his belief in the virtue of people who 'pull themselves up by the bootstraps,' Ryan warned that a generous safety net 'lulls able-bodied people into lives of complacency and dependency, which drains them of their very will and incentive to make the most of their lives. It’s demeaning.' How very kind: To protect poor Americans from being demeaned, Ryan is cutting their anti-poverty programs and using the proceeds to give the wealthiest Americans a six-figure tax cut." Dana Milbank in The Washington Post.

4) PORTER: Income inequality undermines democracy. "Americans have never been too worried about the income gap. The gap between the rich and the rest has been much wider in the United States than in other developed nations for decades. Still, polls show we are much less concerned about it than people in those other nations are. Policy makers haven’t cared much either. The United States does less than other rich countries to transfer income from the affluent to the less fortunate. Even as the income gap has grown enormously over the last 30 years, government has done little to curb the trend...A growing income gap has bred a gap in political clout that could entrench inequality for a very long time...If the very rich can use the political system to slow or stop the ascent of the rest, the United States could become a hereditary plutocracy under the trappings of liberal democracy." Eduardo Porter in The New York Times.

5) KELLY: The U.S. should focus on developing more oil close to home. "Thanks in part to surging oil imports from our continental neighbors, Persian Gulf oil now constitutes a significantly smaller share of American oil imports than it did just 20 years ago. At the same time, domestic oil production is actually increasing after decades of decline, meaning we have to import less than before. Taken together, these trends suggest that the oil weapon, at least in the hands of Persian Gulf producers, may no longer have the same edge for the United States...This geopolitical paradigm shift means that America needs to realign its energy policy in several key places. For one thing, we should review the estimated $50 billion a year we now spend to maintain a military presence in the Persian Gulf, not counting the costs of the wars we’ve been fighting in the region." Stephen Kelly in The New York Times.

6) MARCUS: Overturning the mandate would drive up premiums. "The mandate is by far the most unpopular feature of a law on which Americans are otherwise evenly divided. A Kaiser Family Foundation poll this month found that two-thirds of those surveyed disliked the mandate. Even among Democrats, a majority (53 percent) opposed the requirement; independents (66 percent) and Republicans (77 percent) were even more hostile. Yet this is a provision that the overwhelming majority -- those with insurance -- should support, for the simple reason that these people currently end up footing the bill for much of that $116 billion. As the government’s brief notes, 'Congress found that this cost-shifting increases the average premium for insured families by more than $1,000 per year.' In other words, those worried about having to pay ever-higher premiums should be clamoring for the individual mandate, not agitating for repeal. " Ruth Marcus in The Washington Post.

Top Longreads

Alec MacGillis on how Obama offended his onetime friends in the hedge fund world: "In one sense, the rhetoric was restrained—Obama never declared of the plutocrats, as Franklin D. Roosevelt did in 1936, “I welcome their hatred.” Yet it wasn’t hard to imagine a fund manager discerning a declaration of sorts in the answer to Scaramucci and in other moments over the past few years, one that was less aggressive than Roosevelt’s but potentially more upsetting. Namely, that Barack Obama, the man with whom the managers had once felt a true bond, simply did not think very much of them. That, in between his relatively measured lines about tax codes and financial reform, he was delivering an unmistakable moral judgment about the worth of the profession they had chosen. That the story they were telling themselves about their own lives was highly questionable."

Roger Lowenstein profiles Ben Bernanke: "Mankiw says there is a bizarre disconnect between the chairman’s reputation among experts, who mostly respect him, and the public’s disapproval. Professional colleagues speak of his courage and resourcefulness. Larry Summers, formerly President Obama’s economic adviser, who is known for his caustic tongue, told me that among Washington insiders, 'I don’t think anyone dislikes him.' Even some of his critics, on closer inspection, are not so critical. Kevin Hassett, a conservative economist who helped organize the November 2010 open letter against quantitative easing, told me that while he disagrees with Bernanke about that easing program, overall, 'I don’t see how anyone could do a better job.' Sounding embarrassed about the attacks by some Republicans, Hassett added, 'I don’t see how you can hate him.'"

Still to come: Banks want to slow down the 'Volcker rule'; IPAB repeal has run into some unexpected pushback; 'right to work' is dividing conservative lawmakers; some activists say the EPA's rule delays are driven by politics; and two year-old dances the the jive to Elvis.

Economy

Some are calling for more action on unemployment from the Fed. "Federal Reserve Chairman Ben S. Bernanke has left his mark on economic history not once but twice, using almost every weapon in his arsenal to quell the financial panic of 2008 and then to lift the U.S. economy out of the recession that followed. But now, in the latest and perhaps final chapter of his public life, that legacy could be recast if he misjudges the nation’s slow-going economic recovery. A debate is raging over whether Bernanke should become more aggressive about reducing joblessness or continue a more restrained approach. With the Fed’s policymakers taking no new action at their meeting last week, Bernanke is staying cautious for the time being, reserving the central bank’s more powerful weapons in case the recovery stalls. Some economists say this is the right policy for a recovery that seems to be gaining stream. But, if the unemployment rate, which stands at 8.3 percent, does not continue to decline at a fast pace, critics say Bernanke’s legacy could be impugned." Zachary Goldfarb in The Washington Post.

Reauthorization of the Export-Import Bank failed to move forward. "The Senate voted Tuesday not to reauthorize an export bank that its supporters -- a coalition of Democrats, some Republicans and prominent business interests -- say generates thousands of jobs. The vote on reauthorizing the Export-Import Bank, part of an overall package that would lift a half-dozen regulations for small businesses, failed 55-44. The measure needed 60 votes to proceed...The Ex-Im Bank’s mandate is set to expire in May, but its $100 billion lending cap is on course to max out earlier than that. The amendment, sponsored by Democratic Sens. Maria Cantwell of Washington and Tim Johnson of South Dakota, and Republican Sens. Lindsey Graham of South Carolina and Richard Shelby of Alabama, would have upped the Ex-Im Bank’s lending cap to $140 billion and reauthorized the agency through 2015." Seung Min Kim in Politico.

Two Fed nominees moved closer to confirmation. "Two of the White House’s nominees to fill vacancies on the Federal Reserve board moved closer to confirmation on Tuesday after a routine Senate hearing. The Senate banking committee held a hearing to test the two candidates, the Harvard economist Jeremy C. Stein and Jerome H. Powell, a former private equity executive and Treasury official. If the committee approves the two candidates as expected, perhaps as early as next week, and they pass a Senate vote, the Fed would have a full roster of seven confirmed governors for the first time in six years. The confirmation process for the two capital markets experts comes amid a tense political climate. For months, the White House has lashed out at Congress for failing to vote on confirming important economic policy makers, including nominees to the Fed board. Lawmakers, in turn, have criticized the White House for starting to vault over the traditional confirmation process." Annie Lowrey in The New York Times.

Banks are pushing for a delay of the 'Volcker rule.' "For Wall Street banks worried about the controversial 'Volcker rule,' help may be on the way. Senators from both parties are working to give regulators more time to write the rule, potentially easing banks' concerns that their activities will run afoul of the law as a July deadline passes. The Volcker rule, which restricts banks' ability to trade with their own money, is set to take effect July 21, whether or not regulators have a final rule in place, according to the 2010 Dodd-Frank financial overhaul law. Federal Reserve Chairman Ben Bernanke said last month that regulators likely wouldn't have a rule in time. A group representing banks and others involved in bundling and selling loans is warning that deals worth hundreds of billions of dollars may need to be shut down because of wording in the law requiring compliance with a rule that doesn't yet exist." Victoria McGrane in The Wall Street Journal.

The Ryan plan has an Obamacare connection. "The White House and House Republicans don’t hold many similar views on how to reform health care, but as of Rep. Paul Ryan’s 2013 budget, they do agree on the goal: Both have outlined plans that would slow the growth of health costs. Both try to hit a target of slowing Medicare’s growth to just 0.5 percent faster than the rest of the economy. And if you dig into how they would get there, the policies start looking pretty similar. The Republicans’ budget, released today, would rely on competitive bidding...If this sounds familiar, that’s because it’s the same process the Affordable Care Act uses to set premiums on the exchanges that launch in 2014. There, insurance subsidies are tethered to the cost of the exchange’s second-cheapest (or 'silver') health insurance plan. A person who wants to purchase a more expensive plan would have to foot the bill for the difference." Sarah Kliff in The Washington Post.

A bill to repeal IPAB is facing some conservative opposition. "A mix of conservative ideologies came into sharp collision Tuesday as Republicans readied to repeal yet another piece of President Barack Obama’s health-care law. The problems came when Republicans were preparing legislation to wipe out the Independent Payment Advisory Board, a panel created as part of the Democrats’ health-care law. Its purpose: Keep Medicare spending down. To pay for repealing that provision costs big money, and Republicans wanted to offset the cost with medical malpractice reform -- something they think can save tens of billions of dollars. But a gaggle of Republican lawmakers came alive to the fact that changing malpractice laws at the federal level would interfere with existing state laws -- in some cases, nullifying states’ constitutions. States’ rights advocates got up into a tizzy." Jake Sherman and Anna Palmer in Politico.

@ezraklein: It would be very interesting to see CBO estimate the uninsured population under Ryan's budget.

Domestic Policy

The Senate will vote on the House's insider trading bill. "Seeking to break a deadlock on a high-profile reform bill, Senate Majority Leader Harry Reid has moved to force a Senate vote on legislation to bar insider trading by lawmakers and staff. Reid filed a cloture petition on the Stop Trading on Congressional Knowledge (STOCK) Act on Tuesday, setting up a Thursday vote to move forward on the bill. The legislation would bar lawmakers and their aides from trading stocks, bonds and other financial investments using non-public information gained through their congressional positions. Senate Minority Leader Mitch McConnell (R-Ky.), who also wants to pass the bill, is backing Reid’s move for the cloture vote...Reid and McConnell want to move forward on the House version of the legislation. Two significant provisions were dropped by the lower chamber, angering some Democratic and Republican lawmakers in both chambers. The House also expanded the bill to cover executive branch agencies." John Bresnahan and Anna Palmer in Politico.

'Right to work' bills are dividing legislators. "After costly, bruising political showdowns with union forces last year in Wisconsin and Ohio, Republicans in some state legislatures are facing a tugging match within their party -- between passionate conservative members like Mr. Thompson, a freshman who was among hundreds of legislators swept into statehouses in 2010 who want to push forward, and a more moderate bloc not sure it is wise to take on labor so directly now. The dueling pressure comes at a key moment in an election year -- not only for the presidency, but for more than 5,900 state legislative seats around the nation -- with Republican leaders eager to keep newfound legislative majorities in capitals like this one. The much-publicized union battles last year, which led to a recall campaign against Gov. Scott Walker in Wisconsin and to the repeal of a bill limiting collective bargaining backed by Gov. John R. Kasich of Ohio, seemed likely to quiet such efforts. But some Republicans have pushed ahead, to the discomfort, in some cases, of their fellow Republicans." Monica Davey in The New York Times.

Some see politics in the EPA's rule delays. "The Environmental Protection Agency’s silence on a slew of pending rulemakings is worrying some supporters, who fear the regulations will remain trapped in the White House when an election-year window for new announcements slams shut. Administrators have repeatedly assured interest groups and lawmakers that the EPA is preparing to release numerous proposed and final rules for greenhouse gases, coal ash, sulfur in gasoline and particulate matter. But in reality, few are moving, and announced deadlines are passing...Regulations requiring new power plants to limit greenhouse gas emissions are bottled up at the White House Office of Management and Budget, and negotiations with environmental litigants have not yielded a specific date for release. 'In two weeks' has become EPA standard rolling timeline since January. Meanwhile, the agency has gradually tamped down expectations for other greenhouse gas regulations that were expected to follow the new power plant rules." Erica Martinson in Politico.

The House will vote on another short-term transportation bill extension. "The House will move another short-term transportation bill extension in a bid to avoid shutting down the federal government’s ability to collect and spend gas tax revenues at the end of the month. A senior House GOP aide confirmed that the House’s extension will be free of extraneous policy riders. The current law will expire on March 31...The lobbying world expects the extension will be on the short side, between one and three months. The realities of the congressional schedule suggest a one-month extension may be less likely, considering both chambers will be in recess for half of April...It remains to be seen how the Senate will handle whatever the House sends over, but the most likely course on Tuesday morning seemed to be just clearing whatever the House sends over, presuming it is clean." Kathryn Wolfe in Politico.

The money to close aging nuclear reactors is lacking. "The operators of 20 of the nation’s aging nuclear reactors, including some whose licenses expire soon, have not saved nearly enough money for prompt and proper dismantling. If it turns out that they must close, the owners intend to let them sit like industrial relics for 20 to 60 years or even longer while interest accrues in the reactors’ retirement accounts. Decommissioning a reactor is a painstaking and expensive process that involves taking down huge structures and transporting the radioactive materials to the few sites around the country that can bury them. The cost is projected at $400 million to $1 billion per reactor, which in some cases is more than what it cost to build the plants in the 1960s and ’70s. Mothballing the plants makes hundreds of acres of prime industrial land unavailable for decades and leaves open the possibility that radioactive contamination in the structures could spread. While the radioactivity levels decline over time, many communities worry about safe oversight." Matthew Wald in The New York Times.

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